Latest market data

Stock search

Choosing office space can be very challenging
because your decision will have so many repercussions for your
business. The wrong location, for example, could cost you
employees or clients. What's more, you have to base your
choice on your company's future needs, not just your current
situation.

Given that landlords prefer lease terms of three to five years,
entrepreneurs should consider these questions carefully before
signing on the dotted line:

Is there room for my company to grow?
Any company must consider not only its immediate needs, but also
growth and other factors that could change space requirements
over the course of the lease. If you can't afford to take extra
space to give you room to grow, try to negotiate a shorter lease
term or add language to the lease that gives you the first right
of negotiation on any adjacent space that becomes vacant, says
Julie Clark, a broker with Commercial Space Advisors in Seattle
and founder of SharedBusinessSpace.com, a national online
directory.

Is it the right location for my key
employees?
Consider where your key employees live and whether the space is
convenient for them. A long, expensive commute may push them to
seek employment elsewhere. "When considering a move, you might
want to let your key staff weigh in so you don't risk losing
them," says Peter Riguardi, president of New York operations for
Jones Lang LaSalle, a commercial real
estate firm.

Is the location convenient for clients?
You also want your office to be accessible to clients, as
transportation costs continue to rise and people may not be as
willing to travel to patronize your business. If you leave an
urban location for a cheaper space in the suburbs, consider
whether the lower expenses will make up for the possible loss of
clients. Even in the age of video conferencing and Skype, it's
important that face-to-face meetings be manageable, Riguardi
says.

Does this office send the right signal?
Think about the signal you want to send when you pick your
location. Your office space will be much more than a collection
of cubicles; it also will be a sign to others of how much money
you're making. "I've seen companies spend for a lavish space
they're very proud of. They invite clients to see it, and the
clients wonder if they're paying them too much for their
services," Riguardi says. On the other hand, if you don't spend
enough, people may wonder about the financial health of your
company.

Are there hidden costs I'm not
considering?
Calculate the full cost of the space–rent, utilities,
construction costs, moving expenses, and other costs that may not
be obvious. Because there can be hidden expenses, Riguardi
recommends hiring a professional broker to help you understand
your total outlay. "You have to look at the costs associated with
the move, even restoration of the space you're moving from," he
says

What is the parking situation?
It's important to consider the amount of parking available at
your proposed location, as well as the potential cost to
employees and customers. If parking is tight, is there a place
where employees can park so customers get the most convenient
spaces? Negotiating special employee rates and validating
customers' parking tickets are good ideas, but they need to be
worked into your budget, Clark says. "If it is difficult and
costly for your employees or customers to park, they might not be
your employees or customers for as long as you would like."

Is the office ADA compliant?
Before choosing a building, make sure the landlord
is responsible for compliance with the Americans with
Disabilities Act, says Jason Hughes, president of Hughes Marino,
a tenant representation company in San Diego. "This could be an
enormous cost. Why gamble?" For example, the law states that
doors to office suites should be at least 32 inches wide and
require fewer than five pounds of force to open, while carpeting
in areas open to the public must be secured to the floor with a
pile of less than half an inch.

Would I consider sharing an office?
Sharing space with another company saves money not only on the
office rent, but also on the cost of common areas like kitchens
and bathrooms, Clark says. For referral purposes, it's ideal to
share with complementary businesses, such as an architect with a
builder or a PR firm with a Web designer. There should be a
formal agreement between tenants, even if it's month to month.
Also, "if it is a good fit for you, you want to make sure the
lease on the space you're sharing isn't going to expire anytime
soon," Clark says.

What if I sell my company during the course of the
lease?
If you hope to sell your company, make sure the lease is clear
about owner responsibility, Hughes says. Many leases force the
original company and its owners to have liability in the future
should the future tenant not perform. "There's nothing happy
about selling your company only to find out two years later that
the buyer hasn't paid the lease payments and now the landlord is
coming after you for unpaid rent," Hughes says.

How secure are the lease and rental
rate?
The last thing you want is to get established in a space, then
find at the end of your lease that your landlord is renting the
space to someone else or jacking the rent way up. Clark suggests
negotiating language into the initial lease that gives you the
option to renew. Although rental rates are usually negotiated at
the time of renewal, you also can try in the original contract to
cap any increase at no more than 5 percent. "Real estate is
rebounding in many areas, which means rental rates are rising,"
Clark says. "If you can control how much, it's a stick in your
court."